Investors generally gauge a stock’s potential return by examining earnings growth and valuation multiples. At the same time, it’s important to measure the performance of such a stock relative to its industry or peers, or the appropriate benchmark.
If you see that a stock is underperforming on fundamental factors, then it would be prudent to move on and find a better alternative. However, those outperforming their respective sectors in terms of price should be selected because they stand a better chance to provide considerable returns.
Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 over a period of 1 to 3 months at the least and having solid fundamentals indicate room for growth, and are the best ways to go about this strategy.
Finally, it is important to find out whether analysts are optimistic about the upcoming earnings results of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.
Relative % Price change – 12 weeks greater than 0
Relative % Price change – 4 weeks greater than 0
Relative % Price change – 1 week greater than 0
(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, 4 weeks and 1 week.)
% Change (Q1) Est. over 4 Weeks greater than 0: Positive current quarter estimate revisions over the last four weeks.
Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks – that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years – can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.
VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or #2 (Buy) offer the best upside potential.
Here are the five of the 17 stocks that made it through the screen:
Andeavor ANDV: Andeavor (formerly known as Tesoro Corporation), founded in 1968, is an independent refiner and marketer of refined petroleum products in mid-continent and western U.S. Sporting a VGM Score of B, this San Antonio, TX-headquartered company’s expected EPS growth rate for three to five years currently stands at 18.9%, comparing favorably with the industry's growth rate of 9.9%.
KEMET Corporation KEM: Headquartered in Simpsonville, SC, KEMET is one of the leading manufactures of capacitors that are sold to a global client base. The company has a VGM Score of B and an excellent earnings surprise history. It has a 100% track of outperforming estimates over the last four quarters at an average rate of 64.8%.
AVX Corporation AVX: A leading manufacturer of ceramic and tantalum capacitors, in addition to advanced electronic components, AVX has a VGM Score of B. Over 30 days, the Fountain Inn, SC-based firm has seen the Zacks Consensus Estimate for FY 2018 and FY 2019 increase 5.1% and 6.3%, to 83 cents and 85 cents per share, respectively.
Thor Industries Inc. THO: Headquartered in Elkhart, IN, Thor Industries is one of the largest North American recreation vehicle manufacturer. The company has a VGM Score of A and a good earnings surprise history. It surpassed estimates in three of the last four quarters.
Modine Manufacturing Company MOD: Headquartered in Racine, WI, Modine Manufacturing is a designer, manufacturer and distributor of thermal management systems and components for several end markets. The FY 2018 Zacks Consensus Estimate for this company is $1.40, representing some 79.5% earnings per share growth over FY 2017. Next year’s average forecast is $1.59, pointing to another 13.6% growth. Modine Manufacturing has a VGM Score of B.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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